What the law requires, what is up to you, and how to handle holiday pay and overtime correctly for hourly and salaried staff.
The Fair Labor Standards Act requires pay for hours actually worked. It does not require pay for time not worked, such as holidays, and it does not treat a holiday differently from any other day. A non-exempt employee who works on the Fourth of July is owed their regular rate for those hours, and overtime if total hours that workweek exceed 40, but no holiday premium under federal law.
The federal government observes eleven federal holidays, and many private employers use them as a starting point for their own calendar. Observing them is a choice for private employers, not an obligation. See our glossary entry on paid holidays for the basics.
| Practice | How it works |
|---|---|
| Paid holiday off | Eligible employees receive their normal pay for the day without working |
| Holiday premium for working | Employees who work a holiday receive a higher rate, such as 1.5x or 2x |
| Floating holiday | Employees choose a day off from a list or from their PTO calendar |
| Day in lieu | An employee who works a holiday receives another day off with pay; see our guide on time off in lieu |
| No holiday pay | Holidays are treated like any other workday |
Many businesses combine these, for example paid holidays for office staff and a premium for front-line staff who keep the business open.
This is where calculations often go wrong. Under the DOL’s regular rate rules:
For example (fictional), an employee works 32 hours plus is paid 8 hours of holiday pay for a day off. Total pay covers 40 hours, but only 32 are hours worked, so no federal overtime is due. Your state may treat this differently, and your own policy can be more generous. Our guide to FLSA overtime rules explains the regular rate in more depth.
Exempt employees are paid a fixed salary. If the business closes for a holiday and the employee works any part of that workweek, the salary generally cannot be reduced for the closed day. You can require exempt staff to use paid leave for a holiday closure if your policy says so, but the net salary must not drop below what the exemption requires. See our guide to exempt vs. non-exempt employees.
A small number of states have rules on holiday work for certain industries, especially retail, and some public employers and government contractors have their own requirements. State paid sick leave laws may also interact with holidays, for example on whether a holiday counts as a scheduled workday. Union contracts often set holiday pay too. Always check the rules where your employees work and any agreements that apply.
For businesses that stay open, holidays are both a cost and a staffing challenge. Ask for availability early, rotate holiday shifts fairly from year to year and allow shift swaps. Our article on holiday scheduling covers the planning side.
Decide in advance whether part-time, seasonal and newly hired employees receive paid holidays. Common approaches include paying part-time staff a pro-rated amount based on their usual hours, or making holiday pay available after a waiting period such as 30 or 90 days. There is no single right answer, but the rule should be written, explained at hiring and applied to everyone in the same group the same way.
Also think about employees on leave. If someone is on unpaid leave over a holiday, many policies do not pay the holiday, while employees on paid leave may receive holiday pay instead of using a PTO day. Spell this out to avoid disputes.
Accurate records make holiday pay simple. With EZTime, employees clock in as usual, schedules show who is covering each holiday and managers can see hours building up toward overtime during holiday weeks. Approved hours export to payroll, where your provider applies the holiday rates from your policy.
Federal law does not require private employers to pay for holidays not worked. Paid holidays usually come from company policy or contracts.
Not under federal law, unless the hours also count as overtime. Some states, contracts or policies require a holiday premium.
Pay for a holiday not worked is generally not hours worked. A holiday premium of at least 1.5x for hours worked can usually be credited toward overtime.
Generally not if they work any part of that week. You may be able to require them to use paid leave, depending on your policy.
That depends on your policy. Many employers observe the nearest Friday or Monday.
Employees request time off in the EZTime app and can see their PTO balance; managers approve from the same place. Plans start at $2 per employee per month, with a $20 monthly minimum.